From Mr A. Edward Gottesman.
Sir, History teaches two lessons that argue against Martin Wolf’s proposal to increase taxes on property in order to reduce taxes on labour (“ Why we must halt the land cycle “, July 9).
First, much of the gain from land price rises is solely produced by inflation. Second, reducing the benefits of property ownership – or taxing it heavily – leads to neglect.
Mr Wolf need only compare the £1m ($2m) present value that he assumes for the land on which his house sits with the salary that a television presenter can command today compared with 1984. In both cases, supply and demand have been affected by other economic forces, but a large part of Mr Wolf’s “gain” results from depreciation of the currency.
At the same time, many areas of Britain have been blighted by the failure to maintain property from which the yield, either to a local council or to private landlords, has been inadequate.
Higher taxes on property can be unfair when the state takes part of the illusory money gain that does not represent an increase in real wealth. Society as a whole is hurt if tax on future increases in value leads owners to allow the already decrepit housing stock of the UK to deteriorate further.
A. Edward Gottesman,
Gottesman Jones & Partners,
London EC4, UK
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